Denise Chisholm's sector and factor perspectives – March 14, 2024

Today on the show, we welcome Denise Chisholm, Director of Quantitative Market Strategy, with her monthly sector watch commentary. In this episode, Denise discusses this year’s presidential election and its impact on the economy, inflation and potential federal rate cuts, what sectors are on her radar. Denise says volatility in inflation is expected to continue, but, despite recent fluctuations, overall inflation growth remains modest and is not expected to significantly impact market returns.  She notes unless inflation accelerates to top quartile levels (around 4.5%), it is not considered a critical market driver.  The current level of inflation and Fed funds rate suggests a likelihood of a Fed rate cut in the near future, but when that will be is still unknown. From a sector perspective, this is what she’s looking at. Key market drivers continue to be: Earnings recovery and level of uncertainty in the market. She notes a level of uncertainty could be quite high when wide valuation spreads in the equity market are relative to very narrow spreads in the credit markets.  As an investor, the best risk-reward could be in the cyclical oriented areas, such as the technology sector. Denise recommends avoiding “classic defence” sector in terms of utilities and consumer staples.

Recorded on March 14, 2024.

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